Standard Motor Products, Inc. Q1 2020 Investor Presentation 1 - - PowerPoint PPT Presentation

Standard Motor Products, Inc.

Q1 2020 Investor Presentation

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Forward Looking Statements

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You should be aware that except for historical information, the matters discussed herein are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements, including projections and anticipated levels of future performance, are based on current information and assumptions and involve risks and uncertainties which may cause actual results to differ materially from those discussed herein. Further, we expect the COVID-19 pandemic to impact our future sales and profitability as described in our 10-Q as of March 31, 2020 and filed with the SEC on April 30, 2020. You are urged to review this filing, and all of our filings, with the SEC and

• ur press releases from time to time for details of these risks

and uncertainties.

Industry and Business Overview

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Why Invest in SMP?

Longstanding business led by experienced management team Leader in engine management and temp control aftermarket Significant share of stable industry with positive outlook Proven strategy for long-term outperformance Superior shareholder returns Financial results demonstrate success

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SMP Snapshot

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87% 13%

Sales by Market Aftermarket OE / OES

75% 25%

Sales by Product Line Engine Mgmt Temp Control

2019 Sales Breakdown

• Founded 1919
• $1.1 Billion 2019 Sales
• 4,200 Employees

Worldwide

Major Product Categories 101 Years in Business

• Ignition Products
• Emissions Products
• Fuel Delivery
• Vehicle Electronics
• Wire & Cable
• A/C Compressors
• Other A/C System Components
• Engine Cooling Products
• Blower & Radiator Fan Motors
• Window Lift Motors

Engine Management Temperature Control

LAWRENCE I. SILLS Executive Chairman Board of Directors ERIC P. SILLS Director, CEO and President JAMES J. BURKE Chief Operating Officer DALE BURKS EVP and Chief Commercial Officer NATHAN ILES Chief Financial Officer

SMP Snapshot

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Professionally Recognized Brands Significant Supplier to All Major Distributors

SMP Facilities – Worldwide

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Global Footprint

3 Million sq. ft. • 13 Manufacturing Plants • 6 Distribution Centers • 9 Offices

Favorable Industry Trends

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Miles Driven is Increasing 12-Years+ vehicles continues to grow

249 249 253 258 264 270 272 278

200 240 280

2012 2013 2014 2015 2016 2017 2018 2019

Millions

Total Light Vehicles

U.S. Light Vehicle Parc

Vehicle Population is increasing

Age Mix of Vehicles – Year Range Categories

15% 14% 16% 17% 18% 19% 19% 19% 19% 25% 24% 21% 19% 18% 17% 19% 20% 22% 24% 24% 24% 23% 23% 21% 19% 17% 15% 36% 38% 39% 40% 41% 42% 43% 44% 44%

0% 20% 40% 60% 80% 100%

2011 2012 2013 2014 2015 2016 2017 2018 2019 VIO 0-3 yrs VIO 4-7 yrs VIO 8-11 yrs VIO 12+ yrs

$191 $196 $203 $212 $220 $228 $238 $48 $50 $52 $54 $57 $58 $58 $0 $50 $100 $150 $200 $250

2012 2013 2014 2015 2016 2017 2018

Billions

DIFM DIY

DIFM Revenue Continues to Grow

Source: IHS Markit Source: U.S. Department of Transportation / Federal Highway Administration Source: Auto Care Association / Modern Tire Dealer Source: IHS Markit

2.97 2.99 3.03 3.10 3.17 3.21 3.22 3.27

2.0 2.5 3.0 3.5

2012 2013 2014 2015 2016 2017 2018 2019

Millions

Annual Miles Driven, 2012-2019

Strategy Overview

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Strategic Objectives

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• External programs that provide real value to our customers
• Best-in-class full-line, full-service supplier of premium

engine management and temperature control products

Premium Value Proposition

• Internal programs that make us a stronger company
• Investment in increased manufacturing
• Increase in low-cost footprint
• Global sourcing without compromise to quality

Drive for Continuous Improvement

• Strategic expansion of our business
• Complementary product lines
• Complementary markets, geographies and channels
• Strategic acquisitions

Successful Growth Programs

• Quarterly dividends
• Treasury stock buyback program

Return to Shareholders

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Drive for Continuous Improvement

• Increased Manufacturing

– Engineering resources up >30% from 2013 – 80% of capital budget for tooling projects – Acquisitions: a great “shortcut”

• Low Cost Manufacturing

– Operations in Mexico & Poland – China expansion (Gwo Yng, FGD, CYJ) – Integration of General Cable – Integration of Pollak (2019)

• Low Cost Sourcing

– Hong Kong Engineering & Sourcing Office – Rigorous U.S. product qualification

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28% 56% 74% 82%

2007 2011 2015 2019

% of Hrs in Low Cost Plants

Committed to Growing Technology Categories

– GDI High Pressure Pumps – First to manufacture in aftermarket – ETB / ETB Kits – Gaskets Included, Manufactured in Mexico – EVAP Components – Manufactured in Independence and Greenville – Active Grill Shutters – Initial offering 12 units – CAPA Certified – Battery Management – Battery Current Sensors 100+ SKUs / 35M VIO – EGT / ETS – Manufactured in Bialystok – Diesel Nitrogen Oxide (NOx) Sensors – High failure OE part – ADAS Components – Market leader in ADAS, 30+ new categories targeted – Accelerator Pedal Sensors – Manufacturing in Mexico – Air Door Actuators – High OE-failure component, 300+ SKUs – Brushless Motors (BLDC) – Modular electronics adaptable to various models – Thermostat Assemblies and Housings – Improved design over the OE – Water Outlets – Industry-leading coverage – TCD Electric Compressors – for HEV and ICE vehicles

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Successful Growth Programs

Successful Growth Programs

Strategic Acquisitions

• 12 Acquisitions in Recent Years
• Primary Focus

– Bolt-on: acquire competitors – Vertical integration: acquire suppliers – New but related business

• Rationale

– Provides enhanced value to our customers

• Helps with Full-Line, Full-Service model
• Rapid entry to new technologies
• Economies of scale allows further investment
• Helps address part complexity / SKU proliferation

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2011 2013 2014 2019 2016 2017 2012

Return to Shareholders

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$0.28 $0.36 $0.44 $0.52 $0.60 $0.68 $0.76 $0.84 $0.92

2011 2012 2013 2014 2015 2016 2017 2018 2019

Annual Dividend

Year Spend Shares

• Avg. Price

2011 $4.1M 322,250 $12.84 2012 $5.0M 380,777 $13.13 2013 $6.9M 209,973 $32.69 2014 $10.0M 284,284 $35.18 2015/16 $20.0M 561,926 $35.59 2017/18 $39.3M 853,551 $46.00 2019 $10.7M 221,748 $48.43 2011 – 2019 $96.0M 2,834,509

Dividend Increase Treasury Stock Buyback Program

SMP Cash Utilization

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Total Cash Usage 17.3 92.0 63.6 41.2 73.5 51.3 104.0 72.9 63.8 91.0 670.6

Uses of Cash: Invest for Growth 74% 89% 79% 59% 70% 35% 85% 43% 47% 66% 67% (Capex + M&A) Return to Investors 26% 11% 21% 41% 30% 65% 15% 57% 53% 34% 33% (Buybacks + Dividends)

10.8 11.0 11.8 11.4 13.9 18.0 20.9 24.4 20.1 16.2 158.5

(CapEx)

4.5 6.4 8.2 10.1 11.9 13.7 15.4 17.3 18.9 20.6 127.0

(Dividends)

2.0 70.5 38.6 12.8 37.7 67.3 6.8 9.9 43.5 289.1

(Acquisitions)

4.1 5.0 6.9 10.0 19.6 0.4 24.4 14.9 10.7 96.0

(Buybacks)

20 40 60 80 100 120 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 '10-'19

Cash Uses ($M)

Capital Expenditures Dividends Cash Acquisitions Buybacks

March 2020 YTD Results

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Year-Over-Year Performance Measures

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Consolidated Net Sales ($M) Gross Margin EBITDA (w/o Special Items) ($M) Diluted EPS (w/o Special Items)

ǂ Includes Wire Integration Costs Incurred From Nogales to Reynosa Move

* Includes Slight Dampening Effect on Margins as a Result of Tariffs $238.9 $282.4 $261.8 $283.8 $254.3 $1,058.5 $1,116.1 $1,092.1 $1,137.9 $- $200 $400 $600 $800 $1,000 $1,200

Mar YTD Full Year 2016 2017 2018 2019 2020

$0.55 $0.74 $0.46 $0.57 $0.43 $2.77 $2.83 $2.55 $3.10 $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50

Mar YTD Full Year 2016 2017ǂ 2018ǂ 2019 2020

$24.7 $33.3 $20.9 $24.8 $20.5 $123.5 $129.6 $107.0 $125.5 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0

Mar YTD Full Year 2016 2017ǂ 2018ǂ 2019 2020

30.5% 29.3% 28.6% 29.2% 30.6% 29.8% 27.7% 27.5% 27.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Full Year Mar YTD 2016 2017ǂ 2018ǂ* 2019* 2020*

Substantial Gross Margin Improvement

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24.3% 25.0% 25.6% 28.2% 30.7% 31.0% 30.4% 31.3% 29.4%ǂ 28.6%ǂ 29.6% 19.7% 23.1% 23.5% 21.8% 22.1% 21.6% 21.9% 25.6% 26.2% 25.3% 25.2%

16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019*

Engine Management Temperature Control

ǂ Includes Wire Integration Costs Incurred From Nogales to Reynosa Move * Includes Slight Dampening Effect on Margins as a Result of Tariffs

Income Statement Non-GAAP

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($ in millions) March 2020 YTD March 2019 YTD Amount % of Sales Amount % of Sales Net Sales 254.3 $ 100.0% 283.8 $ 100.0% Gross Profit 70.4 27.7% 78.0 27.5% SG&A Expenses 55.9 21.9% 60.0 21.1% Operating Profit 14.5 5.7% 18.0 6.3% Other Income/(Loss) (0.5) 0.6 Interest Expense 0.9 1.1 Income Taxes 3.3 4.4 Earnings from Continuing Ops. 9.8 $ 13.1 $ Diluted Earnings Per Share: Continuing Operations 0.43 $ 0.57 $ Diluted Shares (000's) 22,869 22,905

Condensed Balance Sheet

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Actual Q1 2020, Q1 2019 ($ in millions) Dollars Ratios 2020 2019 2020 2019 Cash and Equivalents 13.3 $ 11.7 $ Accounts Receivable/DSO 165.7 174.2 54 50 Inventory/Turns 370.9 365.3 2.2 2.4 Unreturned Customer Inventory 19.4 19.8 Other Assets 371.4 341.7 Total Assets 940.7 $ 912.7 $ Current Liabilities 238.6 $ 261.8 $ Total Debt/Debt to Cap Ratio 109.7 83.9 18.1% 15.1% Other Liabilities 95.8 94.0 Total Liabilities 444.1 $ 439.7 $ Equity/Debt to Equity Ratio 496.6 473.0 0.22 0.18 Total Liabilities and Equity 940.7 $ 912.7 $

Condensed Statement of Cash Flows

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(IN MILLIONS)

Full Year 2020 2019 2019 NET INCOME $8.6 $12.2 $57.9 DEPRECIATION & AMORTIZATION 6.5 6.2 25.8 ACCOUNTS RECEIVABLE (32.7) (22.3) 17.9 INVENTORY (5.3) (14.7) (17.9) ACCOUNTS PAYABLE (11.9) 1.2 (1.9) OTHER OPERATING ACTIVITIES 2.0 (9.3) (4.9) OPERATING CASH FLOW (32.8) (26.7) 76.9 CAPITAL EXPENDITURES (4.4) (3.1) (16.2) ACQUISITIONS 0.0 0.0 (43.5) NET BORROWINGS (PAYMENTS) 53.1 34.8 7.9 DIVIDENDS (5.6) (5.2) (20.6) REPURCHASE OF COMMON STOCK (8.7) (5.8) (10.7) OTHER CHANGES 1.3 6.6 5.4 NET CHANGE IN CASH 2.9 $ 0.6 $ (0.8) $ FREE CASH FLOW (42.8) $ (35.0) $ 40.2 $ March YTD

Appendix

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Reconciliation of GAAP and Non-GAAP Measures

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($ in thousands, except per share amounts) 2020 2019 2018 2017 2016 (Unaudited) EARNINGS FROM CONTINUING OPERATIONS GAAP EARNINGS FROM CONTINUING OPERATIONS 9,621 $ 13,104 $ 8,597 $ 16,367 $ 12,656 $ RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 205

• 2,836

1,547 241 GAIN FROM SALE OF BUILDINGS

• (218)

(262) (262) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (53)

• (681)

(514) 9 NON-GAAP EARNINGS FROM CONTINUING OPERATIONS 9,773 $ 13,104 $ 10,534 $ 17,138 $ 12,644 $ DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0.42 $ 0.57 $ 0.37 $ 0.70 $ 0.55 $ RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 0.01

• 0.12

0.07 0.01 GAIN FROM SALE OF BUILDINGS

• (0.01)

(0.01) (0.01) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS

• (0.02)

(0.02)

• NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS

0.43 $ 0.57 $ 0.46 $ 0.74 $ 0.55 $ MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS AND DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, EACH OF WHICH ARE NON- GAAP MEASUREMENTS AND ARE ADJUSTED FOR SPECIAL ITEMS, ARE MEANINGFUL TO INVESTORS BECAUSE THEY PROVIDE A VIEW OF THE COMPANY WITH RESPECT TO ONGOING OPERATING RESULTS. SPECIAL ITEMS REPRESENT SIGNIFICANT CHARGES OR CREDITS THAT ARE IMPORTANT TO AN UNDERSTANDING OF THE COMPANY'S OVERALL OPERATING RESULTS IN THE PERIODS PRESENTED. SUCH NON-GAAP MEASUREMENTS ARE NOT RECOGNIZED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND SHOULD NOT BE VIEWED AS AN ALTERNATIVE TO GAAP MEASURES OF PERFORMANCE. THREE MONTHS MARCH 31,

Reconciliation of GAAP and Non-GAAP Measures (cont’d)

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($ in thousands) 2020 2019 2018 2017 2016 (Unaudited) EBITDA WITHOUT SPECIAL ITEMS GAAP EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 12,926 $ 17,514 $ 11,644 $ 25,874 $ 20,041 $ DEPRECIATION & AMORTIZATION 6,539 6,178 6,016 5,631 4,373 INTEREST EXPENSE 873 1,089 632 468 311 EBITDA 20,338 24,781 18,292 31,973 24,725 RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 205

• 2,836

1,547 241 GAIN FROM SALE OF BUILDINGS

• (218)

(262) (262) SPECIAL ITEMS 205

• 2,618

1,285 (21) EBITDA WITHOUT SPECIAL ITEMS 20,543 $ 24,781 $ 20,910 $ 33,258 $ 24,704 $ TOTAL DEBT 109,706 $ 83,901 $ 95,922 $ 82,200 $ 49,656 $ DEBT TO EBITDA RATIO (TTM) 0.9:1 0.8:1 0.8:1 0.6:1 0.5:1 MANAGEMENT BELIEVES THAT EBITDA WITHOUT SPECIAL ITEMS, WHICH IS A NON-GAAP MEASUREMENT, IS MEANINGFUL TO INVESTORS BECAUSE IT PROVIDES A VIEW OF THE COMPANY WITH RESPECT TO ONGOING OPERATING RESULTS. SPECIAL ITEMS REPRESENT SIGNIFICANT CHARGES OR CREDITS THAT ARE IMPORTANT TO AN UNDERSTANDING OF THE COMPANY'S OVERALL OPERATING RESULTS IN THE PERIODS PRESENTED. SUCH NON-GAAP MEASUREMENTS ARE NOT RECOGNIZED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND SHOULD NOT BE VIEWED AS AN ALTERNATIVE TO GAAP MEASURES OF PERFORMANCE. THREE MONTHS MARCH 31,

Thank You

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